Group Economics (Part 2): Exploring the Models.

Kingsley Osakwe

6 min readJun 28, 2023

Welcome back! dear readers, to the second installment of our blog series on Group Economics. For those joining us for the first time, we highly recommend starting with Part 1 of this series (Click Here), where we laid the groundwork and discussed the importance of group economics in fostering community empowerment, economic resilience, and social cohesion.

Part 1 of the blog series explored the tenets, benefits, and challenges of the socio-economic philosophy. If you haven’t read it yet, please do (Click Here) and join us on this exciting journey. Let us now move on to Part 2, where we will begin to look at various models of group economics that have emerged around the world.

The principles of Collaboration (Collective Resource Pooling), Cooperation (Cooperative Business Models), and Mutual Support (Knowledge Sharing and Skills Development) form the basis of this socio-economic philosophy as shown this diagram. — Tenets of Group Economics (Click Here)

Join us as we discover the diverse and inspiring ways communities are coming together to shape their economic destinies.

Models of Group Economics

The socio-economic philosophy of group economics manifests in various ways which we will explore. As follows: Microfinance, Cooperative Enterprises, Joint Venture Partnerships, Community-Owned Enterprises, Social Enterprises, and Shared Resource & Consumption Models. The aforementioned models are only some of the many that exist. However, these six models can be considered the most well-defined among the bunch, yielding sustainable economic and societal outcomes in the communities where they are practiced globally today.

We will explore three of these models and the rest in the next post of the blog series. Shall we?

Microfinance ‘MFI’ Model:

Possibly the most commonly practiced model among the six models we will be deep diving into, with over 140 million global microfinance institution clients, is Microfinance. It has garnered widespread acclaim for its potential to improve the well-being of individuals and communities by providing access to financial services, particularly in underserved regions. Microfinance institutions provide low-income individuals and entrepreneurs who do not have access to traditional banking services with small loans, savings accounts, and other financial products. These initiatives promote entrepreneurship, generate income, and empower individuals to build sustainable livelihoods. According to the 60 Decibels 2022 Microfinance Index: 88% of microfinance borrowers agree their quality of life has improved, 34% say the quality of life is “very much improved”, 73% of borrowers report increased household incomes and seven out of ten say personal savings and financial resilience have improved. A notable example of this model is the BRAC Microfinance, established by BRAC (Bangladesh Rural Advancement Committee). BRAC is a prominent microfinance institution, founded in 1972, and now operating in Bangladesh, Myanmar, Tanzania, Uganda, Rwanda, Sierra Leone, Liberia and serves nearly 750,000 clients, 96% of whom are women. It offers micro-loans, savings programs, and other financial services to low-income individuals, particularly women, to support income generation and improve livelihoods.

Cooperative ‘Co-op’ Enterprise Model:

Businesses that deploy the Cooperative Enterprise Model embody the principles of cooperation, democratic decision-making, and shared ownership. Cooperative enterprises are owned and governed by their members — with a common tagline/slogan “1 partner, 1 vote”, who can be employees, consumers, or producers. These enterprises can operate in various sectors, including agriculture, retail, housing, and finance. Some well-known shared services co-ops include True Value and Ace Hardware stores, Best Western hotels, the Associated Press (AP), and The Mondragon Corporation. The Mondragon Corporation, based in Spain and founded in 1956, is one noteworthy example operating on a global scale, consisting of a network of worker cooperatives across various industries — 81,507 employees (as of 2019). Mondragon exemplifies how cooperative enterprises can foster job creation, wealth distribution, and social solidarity within a community. As of 2022, Mondragon is present in over 150 countries globally, generating over 68,000 jobs with a total of 83 cooperatives actively participating industries such as Education-2.1%, Finance-3.2%, Retail-55%, and Industrial-37.9%.

Mondragon Cooperation’s Global footprint. — Mondragon’s Global Activity (Click Here)

The importance of this socioeconomic model to the global economy and sustainable development can not be overstated, especially during the two most recent global crises. According to United Nations Secretary General’s 2021 report “Cooperatives in Social Development” — In 2012, the International Year of Cooperatives created an atmosphere of recognition and validation, which was particularly welcome after the economic crisis of 2008, after which various studies showed cooperatives’ resilience to the crisis. Furthermore, the report advocates for policymakers to lean into the ideology of co-ops, as well as solidify the role it will play in the post-pandemic era in rebuilding communities — Cooperatives have a significant role to play in the context of the new social contract since they put people, rather than profit, at the center of their operations.

Joint Venture ‘JV’ Partnership Model:

The model focuses on the collaboration of various entities, often organizations or corporations, that have common aims and complementary strengths. In order to embark on initiatives or endeavors that would be difficult or ineffective to pursue separately, companies pool their resources, knowledge, and networks through joint ventures. The financial metrics Alliance Cost Value & Capitalization aid in assessing the financial commitment and resources spent by each partner in a joint venture partnership. The relative ownership and control that each participant in the joint venture has been determined by these financial metrics. As a result, alliance cost value and capitalization are important in financial planning, decision-making, and assessing the overall financial performance and viability of the joint venture partnership. Additionally, it is important to state that joint venture partnerships and strategic alliances are often interchangeable, since this may cause confusion, for the purpose of this blog — they fall under this model. Both Joint Venture Partnerships and Strategic Alliances are forms of business relationships. JVs are more formal, focused, & singular, and result in the creation of a subsidiary company. North American Coffee Partnership (NACP) is an example of such a subsidiary companies, in this case, a product of a 1994 JV between Starbucks and Pepsi. As of 2016, the NACP had grown to a $2 billion retail business. Starbucks got access to the bottled-beverage market, and Pepsi gained a new product with a well-known brand name. According to Pepsi, the partnership’s line of Frappuccino drinks holds over 95% of the market share for ready-to-drink coffee beverages.

Pepsico & Starbucks Joint Venture Infographics

Strategic Alliances, on the other hand, tend to be more free-form and open-ended and don’t typically involve a separate business entity; companies look to synergize their respective strengths to seize new business opportunities that they couldn’t tackle alone. An example of such is the 1993 strategic alliance between Barnes & Noble and Starbucks. The reason so many Barnes & Noble stores have Starbucks in them is that the two companies created a strategic alliance — in this case, a licensing arrangement (that’s why your Starbucks gift cards don’t work at the Barnes & Nobel café!).

Conclusion:

These models covered above truly serve as evidence of the power of this socio-economic philosophy. Researching this philosophy really affirmed a lot I thought I knew about the world while exposing me to so much more, it’s my hope you share the same experience as you read. I encourage you to share this with 2 other individuals of your choice.

In the next series, we will continue exploring additional models of group economics. Deep diving into community-owned enterprises, social enterprises, and more. Join us as we continue discovering the diverse and inspiring ways communities, corporations — large and small businesses — are coming together to shape their economic destinies.